Article

Lauren Daniels
Lauren Daniels 16 January 2020

How Virtual Bank Advances are Creating New Opportunities for Small Businesses

Small businesses have classically been underserved by traditional banking institutions when it comes to credit access. Virtual banks are rapidly altering the financial landscape for these underserved companies. Rory Brown, Managing Partner of Nicklaus Brown & Co., details how small businesses are benefiting new opportunities to participate in credit markets, as well as other related services.

Credit Access

Virtual banks and other fintech companies are exploring new ways to offset the risks of smaller loans, creating a vibrant new credit market for smaller businesses. Kabbage is one service that makes it extremely easy for businesses requiring a short-term capital infusion. An application can be entered quickly through a smartphone app, with a decision delivered in minutes. Once a loan is approved, funds are available immediately. 

Crowdfunding apps, like CrowdFunder and SeedInvest, are powerful options, too. They’re creating peer-to-peer lending options that bring new sources of credit to small businesses.

The days of sitting across from a banker for hours, filling out reams of paperwork, only to be rejected, are over. With fintech and virtual banks, small businesses are in control of their credit and cash flow.

Payment Processing

Before the virtual bank revolution, if a small business didn’t accept credit cards, it had a very difficult time competing. But this was a costly prospect, as standard merchant services tended to favor larger organizations.

Today, small business owners have a myriad of choices for payment processing. Companies like Square and free online accounting packages like Waves allow even micro-businesses to easily accept credit card payments with low fees.

Venmo, Apple Pay and other digital payment systems, as well as digital wallet services offered by virtual banks, have enabled small-scale e-commerce, and have liberated payments from the old credit card/check/cash system.

Accounting

Paying an accountant or a bookkeeper is often a painful expense for small businesses but was, until now, a necessary one. SaaS accounting providers are changing this by developing user-friendly online software packages that handle estimating, invoicing, expenses, payroll, reports, and more. 

Services like Sage Accounting and Quickbooks are affordable options that any business owner can understand and use. Waves take a different tactic, offering nearly all of its accounting functionality for free, making its money off of digital payment processing and other premium services.

Expect to see virtual banks and other fintech companies make deeper inroads into the small business market in the coming years.

About: Mr. Rory Brown has focused on financial technology and investment management for 30+ years. Rory Brown Co-Founded one of the world’s first internet banks and writes extensively about the industry.

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